Opening your own business

I will ask a total of 10 questions, which will be directed towards my business and some information on consumer buying habits revolved around cricket and shopping online. This will help me to understand the needs of the consumers and indications will provide me with information on potential sales and demand.

The sampling method I will choose is cluster sampling; the reason for this is I will select an area such as a cricket club for my sampling as I know that is my target market. This way I will have more positive and realistic results from my questionnaire as it will be answered by the potential target market most likely to use the business.

Questionnaire

I am considering on opening online store selling cricket equipment specialising in major brands such as Gray Nicholls, G&M, and Kookaburra etc. Therefore I am conducting a questionnaire to see whether it is feasible to open on-line store selling cricket equipment.

1. Which age group do you fit in?

Under 16         26-40

16-25               41+  

2. What kind of sport do you participate in?

Football

Cricket

Tennis

Golf

Rugby

Other……………………………….

3. How often do you play?

Once a week

Once every two weeks

Once a month        

4. If I am to open an online website selling cricket equipment would you…

Definitely try it

Very likely to try it

Maybe try it

Less likely to try it

Definitely not try it        

5. When buying your sports equipment how important do you consider each of the following?

                               Very Important        Quite Important        Not Important

Price            

Brand

Location

Quality

6. How much do you roughly spend on your sporting equipment?

Less than £50                          

£51 - £99

£100 - £150

        

7. Where do you buy your equipment from at the moment?

Local Store

On-Line          

8. Would you prefer to buy?

On-Line

In Store

        

9. Do you have access to the Internet?

Yes                            No        

10.  Have you ever done on-line shopping before?

Yes                                No

Thank you for your time.

Purpose of Questions:

I have kept my questionnaire short and concise in order to get accurate results from those surveyed and avoid inaccurate results from usually long and detailed questionnaires. I have used a mix of open and closed questions, quantitative and qualitative to allow better analysis.

I conducted the survey in Slough Cricket Club & Slough’s Town Center, where all the local major businesses lay and shopping area is because it is the busiest place and also I will be able to find people from all age groups. Therefore, it gave me a wide range of choices of potential people to take part in the survey.

I gave each person a general summary of my proposed business idea; I asked the questionnaire and recorded results accordingly so taking up minimal time. In my interview I have come up with the following questions:

Results and Analysis of Questionnaire:

Question 1:

This question indicates the age groups of the interviewees. It will give me rough idea on how many people from certain age groups will try out my online store. The results show that the majority of people interviewed were aged 16-25 and then less than 16. I from this information can concentrate on promoting the business towards these popular age groups and can try marketing methods to attract customers from other age groups.

Question 2:

Whilst answering this question interviewees indicated they participated in more than one type of sport they answered by ticking the box for more than one type of sport. These set of results shows that 70% of the people interviewed participate in cricket which is of high relevance to me as it shows that there is a potential market for this type of business and is relatively popular amongst consumers. This is highly impressive as it is only 7% less than the amount of people who participate in football, which is regarded as the countries national sport. This indicates that cricket has shot up in interest recently and many consider this because of the recent ashes victory for England over rivals Australia.  This is further proven by the following quote from a Mintel report.

“At the time of writing the England cricket shirt was outselling the football strip, as the national side strives to win the Ashes from Australia for the first time in two decades”.

(Source: Mintel reports, sports participation 2005)

 

Question 3:

These results show that 60% of those surveyed participated in cricket at least once a week. This shows a high majority that will mean that the more the consumers participate the more often they will require new equipment which is of high significance to my business. It shows that there is high level of participation in the sport and will lead to me having a large potential market.

Question 4:

This question uses the 90/30 rule that I will be using later on to predict sales forecasting. However the question shows a lot of interesting information showing that 19 of the 30 people surveyed will definitely try the new business. This shows that my new business plan has some potential and the fact that people are already interested in using it. I will need to analyse this carefully because people tend to try out new businesses all the time so I will have to make sure that when consumers to shop online from the business they remain as regular customers and not one off customers, Maybe through good customer service.

Question 5:

        

The above tally chart shows how certain factors hold importance with the different range of people interviewed. I will list the factors in order of importance.

• Price

• Quality
• Location
• Brand

Price seems to be the most important factor affecting consumers whilst they are buying products. This is of high relevance and will become helpful for me as I intend to have a unique selling point in the business, which is selling quality products at low prices.

The next important factor for consumers is that of quality. Like every one else all consumers want quality products for their money and no one likes to buy low quality products as they have disadvantages of being damaged easily etc. Therefore I will intend to provide products of the highest quality for my customers

The last two factors are location and brand. Location can also be considered as an important factor as it is relatively in close competition with quality. Location is important for customers, as they would not want to drive around over long distances to buy products. All customers would require easy access to items they want to buy hence I have decided to sell my products all online. I feel brand is not of much importance, as all customers require is quality products at good prices. Most quality products are from popular brands anyway and I feel popular brands are for the customers who like to be trendy.

Question 6:

This pie chart shows me how much potential customers currently spend on their shopping spree for cricket equipment. It shows that exactly 50% of the people surveyed spent £51-£99 on their products. This set of information is going to help me work out an average spend per customer. Using this information and data I have gathered I will work out an average spend for each customer at a single visit.

Average spend per customer:

Less than £50→£25 (center point)     = 12 customers

£51-£99→£74.50 (center point)         = 15 customers      

£100-£150→£125 (center point)        = 3 customers  

Formula:   Average spend per customer = Center point * Amount of customers

£25 * 12       = £300

£74.50 * 15 = £1117.50

£125 * 3       = £375

           Total = £1792.50 so… £1792.50 / 30 = £59.70 

So… Average spend per customer = £59.70

This shows that every customer on average should spend roughly £59.70 each time they visit the website. This piece of information will also help me in my sales forecasting and other aspects such as cash flows and predicting sales revenue etc.

Question 7:

This graph shows how many people currently buy their equipment online. It shows that a vast majority (24 out of 30) currently goes to a local store. This could be due to the fact that they are unaware of local based websites or any websites that are specialising in cricket products. Therefore I intend to attract these customers towards my business buy informing them and carrying out detailed marketing. Proof of it working can be considered that most of the people interviewed have stated in question number four they would definitely try the new business especially because of its uniqueness of allowing customers to buy their products online and come to the ware house to collect it themselves.  

Question 8:

This graph shows that 70% of customers would want to buy online, as they would find it most convenient. This is good news for me as it reflects on my business gaining higher amount of customers. This shows that there is a potential scope for the business to run successfully as their is an interest in people using the net to shop online.    

Question 9:

This set of results show that nearly every single person surveyed has access to the Internet. This is further proven after the evidence I provided in my secondary research that stated that 64% of the UK’s population has got Internet access. This shows that I have the scope to enter the new market of online shopping because it won’t be very difficult for people to access as almost every household has access to the net.

Question 10:

This graph shows that 80% of people have used the internet before for shopping. This proves that many people have experience of shopping online that proves to me that the target market will not be complete strangers to the business of shopping online. This shows that there is a scope for customers in this field. It is also beneficial for me because it shows in my secondary research that the internet shopping is most popular with 25-44 year olds.                    

SWOT Analysis:

Strengths:

• One of the main strengths is that the business will be selling online; therefore it will have access to a large target market.
• By operating online my primary research shows that 80% of people surveyed have done some sort of internet shopping before.
• Strength is that the business will store all stock in the warehouse and will allow for consumers to come and pick up their purchase themselves, I see this as an advantage as it also provides an opportunity for customers to come and be satisfied with their products.
• The company will be based in Slough which I see as strength as slough is home to a very big cricket community. They have many teams operating in Slough hence I feel this is a great strength because it provides a big target market for the business, and the fact that Slough only has two major cricket stores is a huge bonus because they are considered to be quite expensive and don’t provide much of a variety.
• Low Cost quality pricing would be advantageous as more and more consumers might get attracted by this.

Weaknesses:

• The major weakness is that as the business will be operating online, consumers have access to the World Wide Web which means they can buy from any online store available. This means I will be competing against the whole world as my competition.
• Another weakness will be ensuring consumers that it will be safe shopping online with my business as many will see it as a risk as it is a new business and will need to adapt quickly to gain consumer confidence.
• Finally another weakness is that as it is a new business it will mean the business will have no experience and reputation which will be acquired to gain customer confidence in using my business.

Opportunities:

• The most important opportunity is the scale of growth the business has. This is mainly due to the business operating online which means if the business is successful it can lead to expansion throughout other countries, as at the moment it will only be through out the UK.
• Another opportunity is that the business can expand its distribution service of current stock. They can do this by adapting into selling equipment for other sports such as Hockey and selling kits etc. This would lead to more customers and higher sales which would lead to higher net profit.
• The business if successful has also got the opportunity to expand by developing their own cricket brand which can lead to huge success. They can kick start this by sponsoring professional cricket players to promote their product and by endorsing them as many brands do this already.

Threats:

• The main threat to the company is starting of the business by selling online. The company will need to gain customer confidence very quickly or it can lead to business failure. Especially because the company is operating online.
• The business will need to persuade customers to come and shop online instead of going to competitors because for them they might prefer to stick to their usual place. Also the competitors in Slough can come aware of the business and might put into place a strategy to tackle it so they can keep their customers satisfied and keeping them from shopping online.
• A major threat can be the economy, especially interest rates. This is because with an increase in interest rates costs will go high which can lead to low demand. Also when the economy is in inflation then demand would also fall, but these factors are not in the hands of the business.
• As the business will be using computers a threat is that they will need to be maintained appropriately unless if the server crashes then the business will face difficulty.

PEST Analysis:

Political:

• Political issues need to be considered, government policies for example health and safety legislation for safe and secure working environments as the business includes operating stock in a warehouse. Hence the business will need to fulfill health and safety requirements.
• Also the business will need to meet the legislations on operating online. Legislations regarding advertisement online etc.

Economical:

• Inflation is a major issue that needs to be taken into account as it is a major issue. This will mean it will have a negative impact on consumer spending as inflation increasing means consumers will save money as their will be higher interest rates which means a fall in demand.
• Also as cricket is seen as a luxury consumer might take a break from it, hence demand would fall leading to a fall in revenue. Inflation will mean prices will increase in proportion to the economy and so consumers are less likely to spend money on luxuries such as cricket. It will mean the companies fixed and variable costs will need to be taken into account as material costs could rise meaning stock prices would increase which would lead to higher prices or a lower gross profit margin.
• Money has also been invested into cricket by the ECB (English cricket board) which shows that facilities are being made for cricket hence attracting more people to come towards cricket which means more consumers for the business as demand is increasing.

Social:

• Cricket interest in the past year has seen to be rising rapidly over the last year which means there would be higher demand. My secondary research shows that the cricket shirt even started out selling the football shirt which proves of the high interest in cricket since England’s historic ashes win.

Technological:

• Technology will play a vital role in the business as it will be setup online. There will be a lot of computers involved hence if the system crashes the business can face major problems. Hence the company needs to keep in mind a back up or recovery system.
• Technology is upgraded all the time and the business will need to keep up to date with to keep up to the standards of selling online. So investment in technology should be expected by the business.

Conclusion of Primary Research:

My primary research has highlighted the main preferences of the consumers. I will analyse whether or not I have met my primary research objectives.

• To reveal whether there is an interest for my business idea?

Throughout my research I have come to the conclusion that there is a strong interest for my market as proven in my questionnaire. My questionnaire shows that 60.6% of the people I surveyed had decided to definitely try the business or most likely to try the new business idea.

• How often consumers will use/shop online the business?

My primary research shows that 70% of my target market wanted to shop online as they preferred it.

• What factors affect the choice of a customer when buying the product?

I have analysed the major issues affecting the choice of customers when buying cricket products. My research shows that price and quality are the most important factors affecting consumer’s choice.

• The likely expenditure per consumer?

My primary research shows that the average spends per customer were £59.70.

• Whether they have Internet access at the moment?

The survey showed that 93% of the people surveyed had internet access, this shows that the vast majority of the target market has internet access. Hence I have no problem with potential consumers not having internet access.

• Where they shop from currently?

My primary research showed that, currently most of the people surveyed shop at stores for their equipment; a major reason for this is most likely the fact that there are no current Local facilities for shopping for cricket equipment online. And a local business in slough that operates through the net may be a first

• Have they tried shopping online before?

The vast majority of the people surveyed have tried online shopping, this goes to show that they have experience in shopping online and there is a scope for an online store.

My primary research objectives show I have gained sufficient information for my sales forecasting. It also shows further evidence of the whether it will be feasible to set up an online store. From my primary research I have met all my primary research objectives and found positive information to help me with my sales forecasting.

Costs:

Suitable Warehouse:

£1,618 PCM

FEATURES:

• £10 per sq/ft
• Letting Type: Not Specified
• Furnishing: Unfurnished
• A modern mid-terrace Industrial/Warehouse Unit offering flexible space of some 1,618 sq/ft (150.32 sq/m). Located in a prominent position with easy access to the A4 Bath Road which runs through the centre of Slough.  

Source: http://www.rightmove.co.uk/viewdetails-4753537.rsp?pa_n=2&tr_t=rent

 

Renting Online Servers:

To set up my business online I will be required to rent an online server that will allow me to run my business online.

Our Prices - Intel P4 Dual Core 3.2 GHz

• Intel Pentium 4 Dual Core         CPU Intel P4 Dual Core 3.2Ghz
• Ram         2048MB (PC3200)
• Disk         80GB (SATA2, 7200 RPM, 2MB Cache)
• Bandwidth         700 GB (100MB/S XFER)
• Price         £600 / 6 Months

Source:  

Sales Forecasting:

I will need to carry out sufficient sales forecasting in helping me predict my sales and cash flow etc. I will use the 90/30 rule to help me predict my sales forecasting. I will restrict my self in using just the Slough population as my target market even though the internet has no geographical boundary. I have decided to use Slough as my sample was from Slough. I will use Slough as the sample was of a small number and would make national forecasts very problematic. Slough will be representing the rest of the population as it was the most convenient method for me to use.

Slough Population Source:

I will be using this source of information for calculating the 90/30 rule as my business is based on the internet. This table shows the population of Slough within different age groups.   Source: www.upmystreet.com   

Convert Population into Target Market:

I have cut down the above data to convert the above population into my target market. Below I have selected the population from the age group between the ages 10-54 as it is most suitable for me for my 90/30. This is because these are the major age groups who participate in cricket.

The above information has provided me with the data showing the age groups of the population living in Slough. I will be cutting the number of the population down more as it will give me an unrealistic figure for my 90/30 rule. I will cut it down by the gender of the population as nearly all consumers who participate in cricket are all male. I will calculate this by the fact that the ratio for male to female is 49%: 51%.  

Market Size * Male Ratio = New Market Size

79,461 * 49% = 38935

The new market size has come to 38935 which I will use in my 90/30 rule.  This number shows me how many males there are in Slough and the amount that fit in the age gender of between 10-54.

90/30 Rule:

Definitely try it →         19 - 63%

Very likely to try it→     4 – 13%

Maybe try it→                3 – 10%  

Less likely to try it→      1 – 3%

Definitely not try it→     3 – 10%

63% * 0.9 = 56.7%

→ Plus 13% * 0.3 = 3.9%

Total = 60.6%

(Market Size) 38,935 * 60.6% = 23,361 Potential Customers 

Average Spend per Customer:

Less than £50→£25 (center point)     = 12 customers

£51-£99→£74.50 (center point)         = 15 customers      

£100-£150→£125 (center point)        = 3 customers  

Formula:   Average spend per customer  = Center point * Amount of customers

£25 * 12       =  £300

£74.50 * 15  =  £1117.50

£125 * 3       =  £375

           Total =  £1792.50 so… £1792.50 / 30 = £59.70 

So… Average spend per customer = £59.70

To work out the sales revenue for my cash flow I will need to multiply the average spend per customer with the number of potential customers.  

Sales Revenue per Month: 23,361 * £59.70 = £116,220

The sales revenue has come to an unrealistic number this could be due to the fact that most of the consumers of the product will not spend as much on cricket equipment every year that much. This is because most consumers buy equipment such as cricket bats once a year or maybe even twice a year. Hence I will work out the sales revenue by dividing the sales revenue per month by twelve due to the fact that the potential consumers will not be shopping on a monthly basis because of the equipment that is being sold such as bats, pads etc. as I have highlighted above.  

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Cash Flow Forecast Yr1

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Cash Flow Yr 1-Analysis:

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Cash Flow Conclusion:

A cash flow forecast shows the movement of cash into and out of a business. It will show me the money coming in and going out of the business at the end of every month.

My cash flow shows that there is no need to create a cash flow for year 2 as I intended before. This is due to the fact that at the end of month twelve the cash flow shows a cash surplus.

The cash flow does show a surplus of 21,725 at the end of month twelve that shows that the business will have positive cash flow by the end of year one. However the cash flow does show that the business does have a negative cash flow from January till the beginning of August. This shows that for the first six months of the business operating there will be a negative cash flow. This is not unusual as when businesses start up their first few months or even longer period of the cash flow is negative due to the fact that when a business is started up there are many costs such as setup costs involved in setting up the business such as equipment etc. in order to deal with negative cash flow I will have to generate cash from other sources such as my own savings or maybe even help from friends and family, I might have to take out another loan adding to my starting capital from the bank.

Every three months the utilities bill comes, therefore increasing costs at each consecutive quarter. All my other direct and indirect costs remain at a constant level through out the year.

 I will be aiming to be fully stocked throughout most of the year, as the peak periods are not always definite, but with cricket it is a seasonal sport which means consumers may shop before the season begins, during the season or when the season hasn’t even started, but as it is unpredictable I have decided not to buy any stock during the last three months of the season because the season will have finished and stock will not be selling during this period of time which can lead to stock damaging or even pilferage.

The cash flow shows that it is feasible to open an online store selling cricket equipment but I will carry out other financial methods to prove it further. I will use further methods such as profit and loss and ratio analysis.

Profit and Loss Account:

The profit and loss account calculates the overall level of profit made by a business; it does this by recording all the businesses costs given within a period of time and calculates the net profit by taking away the gross profit.

The profit and loss account shows a net profit of £21,725 which means by the end of the first year the business is operating a profit. It shows that this is a profit making business. However this could easily improve over the next year due to the fact that the business will have fewer costs such as setting up costs like installing the computerised system etc.

Ratio Analysis:

Ratio analysis involves examining, accounting data by relating one figure of financial data to another. It allows a better interpretation of the data and the identification of trends.

Gross Profit Margin:

This ratio examines the relationship between the profit made before allowing for overhead costs and the level of turnover and sales.

Gross Profit Margin =    Gross Profit / Turnover   * 100

Gross Profit Margin =    63,921 / 116,220 * 100

Gross Profit Margin =    55%

This is a very positive gross profit margin for the business as it enables a big enough margin to make profit. The higher the profit margin the better however it also depends on the market the business is operating in, for instance the food industry would not have very high profit margins whereas clothes industries have very high profit margins.

The sporting industry, especially the cricket industry holds quite high profit margins on their products, especially the imported products because they are made in countries that have cheap labour for instance India or Pakistan. Products made in these countries can have profit margins up to 80% profit margins. Most companies selling cricket equipment do keep high profit margins above 65%, therefore I could still increase my profit margin by 5-10% to increase profit, but I need to take into consideration the fact that my USP is that I will be selling high quality products at low prices, so I need to ensure I keep my prices below competitors.  

Net Profit Margin:

This ratio manages the relationship between the net profit (profit made after all overhead expenses have been deducted) and the level of turnover or sales made.

Net Profit Margin = Net Profit / Turnover * 100

Net Profit Margin = 21,725 / 116,220 * 100

Net Profit Margin = 18.7%

The higher the net profit margin the better also. This is because the net profit margin establishes whether the firm has been efficient in controlling its expenses.

However the net profit margin of the business has come out to be quite low. A low net profit margin means that the overhead costs are too much or are increasing too quickly. In this case the net profit margin can be seen to be quite low because there are many over head costs and this can be due to the fact the business is new and hasn’t adapted into the market yet. I feel that the net profit margin will eventually start to increase after the first few years when the overhead costs are gone lower because the business will be adapted and also the fact that whenever a new business is opened they start off with very high overhead costs, hence I feel there is nothing to worry about.

The net profit margin can also be increased by raising sales revenue whilst keeping expenses low or even by reducing expenses whilst maintaining the same level of sales revenue.

Evaluation:

Recommendations:

The business of selling online has potential to be a successful business and has a lot of scope to expand as proven by the above feasibility study. The report shows that